Measure the profit from a by-product; decide whether to further process a by-product before sale. (Objs. 6, 7). A company is attempting to decide whether to sell a by-product without additional processing or to process it further. In an effort to answer this question, you have assembled the following data:

Estimated units of by-product per month, 1,500 units Estimated selling price without further processing, $3.50 per unit Estimated selling price with further processing, $4.25 per unit Estimated labor costs to process further, $1,000 per month Estimated additional material costs to process fvirther, $.30 per unit Estimated additional overhead costs to process further, $.20 per unit

a. Compute the profit or loss from further processing and selling the by-product, using the approach that you think is appropriate to measure profit.

b. Calculate the difference in income between additional processing and no further processing.

c. Make a recommendation to management to further process or not further process the by-product.

LO.1